Friday

15th Dec 2017

Deutsche Bank fined on Russia money laundering

  • "We deeply regret the bank’s role in the issues cited," said DB’s chief administrative officer, Karl von Rohr. (Photo: Tony Webster)

Germany’s largest bank is to pay US and UK authorities over €500 million in fines for laundering billions of euros of shady Russian money.

Deutsche Bank (DB) agreed on the two penalties with the Department of Financial Services in New York (€397m) and the Financial Conduct Authority in London (€191m).

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

  • Wall Street regulator cited DB's "short-term profiteering through improper conduct" (Photo: Dan Nguyen @ New York City)

The fines come on top of earlier penalties, worth billions, for mis-selling US mortgage securities, helping to rig an interbank lending rate called Libor and evading sanctions on Iran.

Maria T Vullo, from the New York authority, said on Monday that DB’s “Moscow, London, and New York offices … laundered $10 billion out of Russia” between 2011 and 2015 and that “today’s action sends a clear message that [we] … will not tolerate such conduct”.

DB’s chief administrative officer, Karl von Rohr, said: “We deeply regret the bank’s role in the issues cited.”

He promised to tighten up anti-money laundering controls and said DB had disciplined staff and closed part of its business in Moscow.

The affair casts a harsh light on the EU banking sector and poses questions on sanctions compliance.

DB’s “mirror trading scheme” saw Russian clients buy shares in Russian firms through its Moscow office. The same Russian clients, whose identities were hidden via offshore firms, then sold the shares through DB’s London branch. The transactions were cleared in DB’s New York office and the Russian clients were paid in US dollars.

The clients used at least 12 offshore entities, some of which were registered in EU member state Cyprus and some in the British Virgin Islands, a UK-linked tax haven in the Caribbean.

A typical transaction was worth about €2 million and made no sense from a financial point of view because clients often lost money on banking fees.

The New York authorities’ “compliance order”, published on Monday (30 January), said there was “clear” evidence that DB staff “knowingly and actively facilitated” the scheme.

It said the Russian clients did not make much effort to conceal the scam, with “several counter parties … registered at the same address” in Moscow.

It also said that one DB executive was paid $3.8 million in bribes, some of them via Cyprus, to look the other way.

“‘Fucking Obvious’ is the middle name of Russian corruption,” Roman Borisovich, a former DB investment banker told the New Yorker, a US magazine, last August when the Russian affair first came to light.

The DB mirror trades were not said to be linked to the EU and US sanctions on Russia that were imposed in 2014 over its invasion of Ukraine.

But they continued after the measures were imposed, undermining Western attempts to restrict Russia’s access to foreign capital in order to enforce a ceasefire deal.

The New York authorities said the mirror trades arose from a “corporate culture that allows for short-term profiteering through improper conduct”.

They said DB staff “did not forcefully question these suspicious trades, because they were earning commissions at a time when trading had dramatically slowed” after the 2008 financial crisis.

Analysis

Deutsche Bank crisis tests EU regulation

EU finance ministers insist that the bank's losses are not a systemic threat, but they revive the debate about the safeguards put in place after the financial crisis.

Deutsche Bank under fire in the US

Two separate reports by the US central bank and the Senate have criticised Deutsche Bank for having internal irregularities and for helping investment funds to avoid taxes.

Stolen Russian billions ended up in EU states

Illicit money flowing out of Russia ended up in almost every single EU state, an investigation has found, posing questions on the integrity of Europe’s banking systems.

Facebook to shift ad revenue away from Ireland

Public pressure about low corporate taxes appear to have pressured Facebook to launch plans to stop routing international ad sales through its Dublin-based headquarters in Ireland.

News in Brief

  1. EU adopts 'track-and-trace' tobacco system
  2. Luxembourg appeals Amazon tax decision
  3. EU leaders agree to open phase 2 of Brexit talks
  4. Juncker: May made 'big efforts' on Brexit
  5. Merkel took 'tough' line on Russia at EU summit
  6. EU leaders added line supporting 'two-state' solution
  7. EU leaders agree to 20 European Universities by 2024
  8. Belgian courts end legal proceedings against Puigdemont

Stakeholders' Highlights

  1. Dialogue PlatformThe Gülen Community: Who to Believe - Politicians or Actions?" by Thomas Michel
  2. Plastics Recyclers Europe65% plastics recycling rate attainable by 2025 new study shows
  3. European Heart NetworkCommissioner Andriukaitis' Address to EHN on the Occasion of Its 25th Anniversary
  4. ACCACFOs Risk Losing Relevance If They Do Not Embrace Technology
  5. UNICEFMake the Digital World Safer for Children & Increase Access for the Most Disadvantaged
  6. European Jewish CongressWelcomes Recognition of Jerusalem as the Capital of Israel and Calls on EU States to Follow Suit
  7. Mission of China to the EUChina and EU Boost Innovation Cooperation Under Horizon 2020
  8. European Gaming & Betting AssociationJuncker’s "Political" Commission Leaves Gambling Reforms to the Court
  9. AJC Transatlantic InstituteAJC Applauds U.S. Recognition of Jerusalem as Israel’s Capital City
  10. EU2017EEEU Telecom Ministers Reached an Agreement on the 5G Roadmap
  11. European Friends of ArmeniaEU-Armenia Relations in the CEPA Era: What's Next?
  12. Mission of China to the EU16+1 Cooperation Injects New Vigour Into China-EU Ties

Latest News

  1. Catalonia, Brexit, and Uber on EU agenda This WEEK
  2. Macron and Merkel take tough line on Poland
  3. Eurozone future needs structural reforms, EU leaders told
  4. Showdown EU vote on asylum looking likely for next June
  5. EU stresses unity as it launches next phase of Brexit talks
  6. Polish PM ready for EU sanctions scrap
  7. Dutchman to lead powerful euro working group
  8. EU mulls post-Brexit balance of euro and non-eurozone states